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Applying Section 1983 Claims to Mobile Home Liens in North Dakota’s Economic Boom

By
Breezy Schmidt
July 2014

Home to the Bakken oil formation, North Dakota is currently the center of an economic boom. Advances in technology have increased oil extraction and production, which has led to a substantial increase in employment opportunities. The oil boom has drawn individuals from all over the country to seek employment in North Dakota, which has experienced a large population increase as a result. However, North Dakota does not have the housing infrastructure necessary to support the incoming population. The lack of housing has caused the cost of housing to skyrocket. In fact, rents in Williston, North Dakota, have been reported to be higher than New York City and Los Angeles. As a result, North Dakota is in a housing crisis. Individuals who have low or fixed incomes, such as seniors and individuals with disabilities, are severely burdened and at a high risk for homelessness.

Legal Services of North Dakota has been allocating more resources for housing cases to tackle the increased housing problems caused by the economic boom. The conservative nature of the state and its laws has required Legal Services of North Dakota to explore and develop creative strategies to advocate for tenants’ rights.

Mobile Home Tenant Affected by the Bakken Boom

“Samuel” is a 72-year-old, low-income individual who is disabled. Samuel and his wife, “Mabel,” owned an older mobile home located in a mobile home park where they paid lot rent to the local owner and manager of the park, “Emerald Estates.” (The names of the parties have been changed to protect their confidentiality.) They rented the lot under a month-to-month lease agreement. Samuel and Mabel lived happily in the park for nearly 12 years.

But then Emerald Estates served Samuel a lease termination notice on July 26, 2012, effective August 31, 2012. The notice stated no reason for the termination. North Dakota law allows property owners to terminate a month-to-month lease with a full calendar month’s notice, and they are not required to state a reason for the termination. Samuel contacted Legal Services of North Dakota for assistance. Legal Services of North Dakota learned that Emerald Estates had previously complained about the exterior condition of Samuel’s mobile home and told Samuel that a negative perception of the park is created when Samuel sits outside his home in his wheelchair with his oxygen tank.

Housing, especially affordable and accessible housing, is extremely difficult to find and obtain in western North Dakota. Few private affordable rental units are available and no place is available to move older mobile homes. Samuel’s community has no homeless shelter. In fact, no adequate homeless shelters are located anywhere in western North Dakota. To make matters worse, Samuel had no disposable income to move, no family or friends to assist him in moving, and nowhere to move, and he could not afford to pay the increased housing costs. Samuel was at imminent risk of being on the street, in his wheelchair, with no place to charge his respiratory equipment and the subzero temperatures of winter quickly approaching.

Advocacy Strategy Employed to Prevent Homelessness

Samuel’s first priority was to keep his current housing or, in the alternative, to find affordable, accessible housing. Legal Services of North Dakota assisted Samuel in requesting a reasonable accommodation. We requested in writing that Emerald Estates allow Samuel additional time either to repair his mobile home or to find alternate affordable, permanent housing and move. Emerald Estates granted the reasonable accommodation request. Then Legal Services of North Dakota assisted Samuel in seeking a community nonprofit organization to repair his mobile home. However, the cost of repairs was too great. In the alternative, we helped Samuel apply for housing assistance. Thanks to local preferences for elderly and disabled individuals, Samuel’s application was moved to the top of the waiting list and he was approved for housing assistance. He moved out of his mobile home at the end of November 2012.

Initial Settlement Negotiation Efforts

With the risk of homelessness diverted, Samuel wished to sell his mobile home. From August through December 2012, Legal Services of North Dakota assisted Samuel to negotiate a settlement with Emerald Estates regarding the disposition of the mobile home. Samuel and Emerald Estates could not reach an agreement.

Initially, Emerald Estates indicated it was willing to allow Samuel to stay if he repaired the mobile home. When Samuel learned that the mobile home could not be repaired because the cost was too great, Emerald Estates indicated it was willing to purchase the mobile home just to be able to move it off the property to the landfill; it contended that the mobile home was uninhabitable and had no value. Then Emerald Estates changed its position and refused to allow the home to remain on the lot even if it was sold and repaired by a new owner. Thereafter, Emerald Estates requested that Samuel give Emerald Estates the title to his mobile home, in which Emerald Estates had no legal or equitable interest. Samuel refused and, in response, Emerald Estates completely ceased communication and negotiations with Legal Services of North Dakota and Samuel without any notice or warning.

North Dakota Mobile Home Landlord Lien and Involuntary Transfer of Title Statutes

Soon after, Emerald Estates sent Legal Services of North Dakota a notice of lien on the mobile home pursuant to North Dakota law. It demanded that Samuel pay $1880 plus accruing fees to Emerald Estates within 30 days from the date of the notice. The notice of lien did not include any evidence to support the reason for or amount of the damages demanded.

North Dakota law allows a mobile home park owner to issue a notice of lien on a privately owned mobile home. The park owner need not have any actual interest—secured or unsecured—in the mobile home. If the home owner does not comply with the notice within 30 days, the park owner may obtain a certificate of title for the mobile home from the North Dakota Department of Transportation. For an involuntary transfer of title, the law only requires the park owner to submit an application, pay a fee of five dollars, and provide documentation to evidence a transfer of title, such as notice of lien. The change of title is issued without any notice, judicial supervision, or due process of law for the home owner.

Litigation Strategies Considered and Pursued

Samuel faced losing his home and his equity in the home simply because Emerald Estates claimed he owed it $1880. Legal Services of North Dakota researched possible claims that may have provided Samuel relief. One possibility was pursuing a fair housing claim. The success of a fair housing claim was questionable where there was little or no evidence to prove the verbal discrimination occurred and little favorable fair housing case law in North Dakota. Another possibility was pursuing a claim against Emerald Estates for intentionally taking Samuel’s mobile home with no due process of law. There is favorable case law in North Dakota finding prejudgment attachments and similar issues unconstitutional. We met with Samuel and discussed the potential claims and risks and benefits of each. Samuel decided to pursue a broader strategy to find the mobile home landlord lien and involuntary transfer of title statutes unconstitutional.

Through representation by Legal Services of North Dakota, Samuel sued Emerald Estates in federal district court on two claims. First, Samuel sought a declaratory judgment that he was entitled to due process of law prior to the deprivation of his mobile home, that the mobile home landlord lien statute was unconstitutional, and that the seizure of the mobile home did not comport with Fourteenth Amendment due process requirements. Second, Samuel sought relief under a Section 1983 claim. He alleged that Emerald Estates jointly engaged with the North Dakota Department of Transportation to deprive him of his mobile home without due process of law or, in the alternative, that the State granted Emerald Estates authority via the statute to act on behalf of the State and failed to provide Samuel due process of law.

To prevent Emerald Estates from taking Samuel’s mobile home, Legal Services of North Dakota requested that the court grant a temporary restraining order and preliminary injunction to enjoin Emerald Estates and the Department of Transportation from selling or transferring or obtaining possession, ownership, or title to Samuel’s mobile home. In determining whether to grant a temporary restraining order or preliminary injunction, a court must consider: (1) the threat of irreparable harm to the movant if the injunction is not granted; (2) whether such harm outweighs any harm that granting the injunction would inflict on the other parties; (3) the likelihood that the movant will succeed on the merits; and (4) whether the public interest will be adversely affected by granting the injunction. All the factors must be considered to determine if they weigh in favor of granting a temporary restraining order or preliminary injunction.

The court quickly granted Samuel’s motion for a temporary restraining order. The court issued a 19-page order finding that Samuel was likely to succeed on the merits of his claims, that he had a significant private interest at stake, and that he was at substantial risk of erroneous deprivation of his mobile home. On the other hand, the court found that Emerald Estates had a significant property interest because it is in the business of renting mobile home lots and the continued presence of Samuel’s mobile home on the lot after the termination of the lease caused Emerald Estates to lose the opportunity to rent the lot to another mobile home owner. In addition, the court found that the Department of Transportation had a significant interest in providing an efficient and effective process to landlords to recover rent owed and costs incurred due to mobile homes left on lots after an eviction or the expiration of the lease term. Overall the court found that additional or alternate safeguards did not exist or were insufficient, that a threat of irreparable harm existed, and that Samuel’s interests and harm outweighed that of Emerald Estates and the Department of Transportation. A show-cause hearing was held, and the court granted Samuel’s motion to extend the temporary restraining order into a preliminary injunction.

Thereafter, the Department of Transportation moved the court to dismiss Samuel’s claims against the State on the ground that Samuel failed to state a claim upon which relief could be granted. Specifically, the Department of Transportation argued that the mobile home landlord lien and involuntary transfer of title statutes challenged by Samuel did not involve state action or private action under color of state law and that the remedies available under the statutes and their use by private parties did not constitute the same. The Department of Transportation analogized the statutes to permissible common law self-help remedies under the Uniform Commercial Code. The Department of Transportation argued that the issuance of a title is merely a ministerial act and does not establish ownership. Moreover, the Department of Transportation argued that the statutes sufficiently protected due process because Samuel’s interests were minimal, the risk of erroneous deprivation was minimal, and the State’s interests were significant.

In response, Legal Services of North Dakota argued that the Department of Transportation’s issuance of a new certificate of title for a mobile home constitutes state action and is not merely ministerial but rather substantively transfers ownership of home owners’ mobile homes without consent. Legal Services of North Dakota distinguished Article 9 of the Uniform Commercial Code. Courts have determined that actions authorized by common law or private contracts are not state action or action under color of state law. However, where a state statute is the sole legal authority for the creditor’s actions, self-help seizures may constitute state action or action under color of state law. Also, under Article 9, creditors have preexisting ownership interests in the property. No such interest existed in Samuel’s case.

In addition, Legal Services of North Dakota argued that Emerald Estates engaged in action under color of state law because Samuel’s deprivation of his mobile home was caused by Emerald Estates’ exercise of a right or privilege authorized by the State; Emerald Estates was required to act with or obtain aid from the Department of Transportation; and Emerald Estates engaged in conduct otherwise chargeable to the State. Legal Services of North Dakota argued that the statutes failed to provide sufficient due process because Samuel had a significant interest in his mobile home and that interest is protected under the Fourteenth Amendment. Samuel’s property interest was not diminished merely because he was no longer residing in the home.

The risk that Samuel would be erroneously deprived of his mobile home was substantial where the statutes failed to provide him an opportunity to be heard or dispute Emerald Estates’ claim upon or interest in his home. The only evidence of Emerald Estates’ interest in Samuel’s home was the notice of lien, which was conveniently drafted by Emerald Estates. On the other hand, the value of additional procedural safeguards was significant. The Department of Transportation and Emerald Estates had important interests, but the burden of implementing additional procedural safeguards to protect Samuel’s important interests was minimal.

Despite the parties’ lengthy arguments, the court did not respond to the Department of Transportation’s motion at that time. Rather, the court ordered a settlement conference, but the parties were unable to reach an agreement at the settlement conference. After formal settlement negotiations failed, the court requested that the parties informally settle the dispute. Informal negotiations substantially lengthened the litigation, and the parties were still not able to reach an agreement.

Then Legal Services of North Dakota was informed by a witness in June 2013 that Samuel’s mobile home had been moved off the lot. Legal Services of North Dakota commenced a thorough investigation to determine the whereabouts of the mobile home. Legal Services of North Dakota attempted to contact Emerald Estates’ attorney, but the attorney failed to return Legal Services of North Dakota’s call immediately and soon after indicated he knew nothing about the removal of the mobile home. Through various interviews, Legal Services of North Dakota learned that Emerald Estates intentionally removed the mobile home from the lot and disposed of it at the local landfill where it was crushed and destroyed. Legal Services of North Dakota immediately filed a motion for contempt based on Emerald Estates’ express violation of the court’s order. Legal Services of North Dakota filed six affidavits and four exhibits in support of its motion for contempt.

While the motion for contempt was pending, the Department of Transportation filed a motion to dismiss for mootness. The Department of Transportation argued that Samuel’s claims against the State were moot where Samuel’s mobile home, the subject of the lawsuit, had been destroyed. In turn, the court could not grant Samuel any meaningful relief.

Legal Services of North Dakota opposed the Department of Transportation’s motion on several different grounds. Legal Services of North Dakota argued that the Department of Transportation failed to prove that the alleged violation would not recur and that interim relief or events had not completely and irrevocably eradicated the effects of Emerald Estates’ violation. In addition, Legal Services of North Dakota argued that Emerald Estates’ destruction of Samuel’s mobile home exacerbated Samuel’s injuries and reaffirmed his interest in the constitutionality of the statutes. The destruction of the mobile home did not dissolve Samuel’s injuries or interests.

Legal Services of North Dakota further argued that Samuel’s claims were not moot because the collateral consequences of Emerald Estates’ wrongful conduct would cause Samuel to continue to suffer harm, and the public interest demanded that the court retain jurisdiction and resolve Samuel’s claims. Moreover, Legal Services of North Dakota argued that the equitable doctrine of unclean hands required the Department of Transportation not to benefit from the unfair and unlawful destruction of Samuel’s home.

The court determined that Samuel’s claims against the Department of Transportation were moot and granted the Department’s motion to dismiss with prejudice. We considered and discussed whether to appeal the court’s decision. Due to the stress of the litigation, in addition to his dwindling health, Samuel decided not to appeal the court’s dismissal of his claims against the Department of Transportation.

Outcome

Samuel intended to continue his pursuit of the Section 1983 claim against Emerald Estates. The court did not formally dismiss the Section 1983 claim against Emerald Estates. However, the court informally indicated in status conferences that it was not interested in and would not be making a determination on the merits of whether the mobile home landlord lien and involuntary transfer of title statutes were unconstitutional. We considered and discussed whether to engage strategies to force a decision on the merits or appeal the issue to the Eighth Circuit Court of Appeals. However, Samuel determined not to appeal for the same reasons that he did not appeal the mootness decision.

The court did issue an order granting Samuel’s motion for contempt in January 2014. The court held Emerald Estates in contempt of the court’s preliminary injunction and ordered it to compensate Samuel for the destruction of his mobile home plus a penalty for the flagrant violation of the court’s order in the amount of $4,950. The court ordered that Samuel was entitled to reasonable attorney fees and costs in bringing the contempt motion. Legal Services of North Dakota submitted a request for attorney fees totaling over $12,000. Emerald Estates argued that Legal Services of North Dakota’s request for attorney fees was excessive, largely due to attorney inexperience. In the end, the court awarded attorney fees for the contempt motion in the amount of $6,000.

Even though the court did not rule on the merits, the case was a success. Samuel was able to move into affordable housing and did not become homeless. Samuel was reimbursed for at least the partial value of his mobile home in the amount of $4,950. Samuel’s public benefits, particularly Medicaid, were not negatively affected or interrupted by the litigation or damage award. The court seemed to recognize Samuel’s important interest in his mobile home and granted a fair outcome in the face of very conservative pro-landlord laws in North Dakota. Samuel was not ordered to pay Emerald Estates any damages, including any amount of rent for the time the mobile home remained on the lot after he moved. Emerald Estates was taught a valuable lesson the hard way: do not ignore court orders and do not destroy tenants’ mobile homes. The court awarded $6,000 in attorney fees, which will allow Legal Services of North Dakota to assist other tenants desperately in need during the housing crisis. Legal Services of North Dakota intends to continue to advocate creatively and zealously for tenants’ rights in the Bakken Boom.